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Blog | Wednesday November 9, 2022

Inside BSR: Q&A with Jonathan Morris

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Tell us a bit about your background. Where are you from, and where are you based? What does a day in your life look like? What is your favorite hobby?

I was born and raised in New Jersey, studied computer science in upstate New York, and spent the first stop of my career working as a packaging developer for Coty in New York City. I had a “crisis of conscience” in my mid-20s and ultimately made my way across the pond to study sustainability at HEC Paris. I’ve lived in France for over 13 years, and I wouldn’t want to be anywhere else.

A day in my life consists of lots of family time with my wife and two little ones, Olivier (5) and Agatha (3), biking in and around Paris, often on the way to the BSR office. My evenings are split between home-cooked meals with friends, a handful of hobbies, and a fair amount of external work events. My favorite hobby is definitely singing—second only to training for races. I’ve been singing and playing instruments since I was little, and today I’m a tenor soloist in a 30-person choir.

What are some interesting projects that you get to work on as part of your role at BSR? What do you enjoy about them?

I got involved in sustainable business thanks to a fluke, really. I was studying sustainability at the Business School HEC, but it was a real career shift moment and those are never guaranteed.

HEC held a speed-networking event with alumni, and I met Pablo Fuentes who had just finished the same masters program and then interned at BSR (who now works for Rever Consulting in Brazil). Once he described BSR’s work and mission, I was convinced it was the place for me.

I’ve now been with BSR for almost 12 years, and I've worn multiple hats over the years. I first supported our work in stakeholder engagement, sustainable fashion, and French regulation, and I supported a number of collaborations, such as Clean Cargo and Pharmaceutical Supply Chain Working Group. I also joined the Consumer Sectors team as BSR’s beauty and personal care sector lead, working with companies like L’Oréal and Estee Lauder. And over time I became our global reporting lead, founding our Future of Reporting collaboration.

Recently, I’ve shifted gears once again and I have three prime responsibilities: I lead BSR’s Paris office, I lead the intersection of tech and industrials sectors for EMEA, and I lead our engagement with high-growth companies in EMEA.

What issues are you passionate about and why? How does your work at BSR reflect that?

That’s my real passion—working in tech and in sustainability. I’ve always been a self-professed tech geek. I grew up surrounded by tech. My mom started her own communications business in our basement, and we always had cutting-edge Macs and high-speed internet. It was a perfect storm.

I found ways to involve myself with our technology members over the years, but today I count myself incredibly lucky to dedicate much of my time to solving the crunchy tech sector sustainability challenges—from identifying human rights risks to defining responsible product development and use practices, to enabling more sustainable e-commerce and building sustainability programs from the ground up for early-stage companies—and beyond.

There’s something about people working in tech. They’re passionate, innovative, energetic, and disruptive—but increasingly extremely well-informed on the responsibility that comes with the power of tech in the 21st century. It’s thrilling. And I get to dive into incredibly fun topics like AI, VR, virtual twins, the metaverse, electric vehicles, and much more. Working on these exciting and daunting topics is a way of pairing my passion for tech and my driving need to work on sustainability. As I said, I’m incredibly lucky.

What were the things that brought you joy amid the uncertainty and challenges of the past two years? What are you looking forward to in 2022 and beyond?

These past two years of COVID have been a challenge. But what has brought me joy amidst all of that is simple—the people around me. Watching my little ones continue to grow, finding a new rhythm with my partner, working with incredibly supportive colleagues, and connecting with family, friends, and peers all around the world in our shared, virtual, at-home existence. It was surreal, but it was also heartening that we found ways to reach out and be with each other.

Looking forward can be daunting. We have our work cut out for us. The planet’s getting warmer, our political divides are deepening, and our once taken-for-granted progress on issues like gender equality and diversity are being put into question. We have to accelerate our work. While tech alone won’t save us, I look forward to deepening my work in the sector and with the BSR team, because I know our people are motivated to overcome these challenges and make the world that much better.

People

Richard Wingfield

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Richard leads BSR's Responsible Technology team and portfolio, working with companies across sectors to take a responsible approach to the design, development, use, and governance of technology, aligning innovation with international human rights and environmental standards.

He brings deep expertise on the relationship between technology and society, with a particular focus on translating international human rights law and standards into practical approaches for the development and governance of AI and other emerging technologies. He has supported companies with human rights due diligence of new technologies and high-risk markets, the development of AI governance, and impact and risk assessments.

Drawing on his background as a practicing lawyer, Richard has particular experience helping companies understand and address the impacts of emerging technologies while navigating evolving regulatory requirements. He has worked with many companies undertaking risk assessments required under the EU Digital Services Act and the UK Online Safety Act.

Prior to joining BSR, Richard led the legal and policy team at Global Partners Digital, an international human rights organization focused on the impacts of digital technologies on human rights.

Richard holds an LLB in Law and European Law from the University of Nottingham and is a qualified lawyer in England and Wales.

People

Diane M. LuTran

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Diane advises private equity firms and global investors on integrating sustainability and impact into core investment and operating decisions.

As Director of BSR’s Financial Services practice, she sets the strategic direction for the organization’s private markets work and partners with investment and corporate leaders on impact fund strategy and design. Her work spans the full investment lifecycle, from due diligence through post-investment value creation and exits. She also contributes to BSR’s AI strategy, bringing a systems-thinking approach to the intersection of AI, sustainability, and organizational transformation.

Previously, Diane was a Senior Manager at Ramboll Strategic Sustainability Advisory and held roles in corporate strategy, impact investing, and economic policy at the World Bank Group, the International Finance Corporation, and the International Monetary Fund.

She holds a joint Global MBA from Columbia Business School, London Business School, and Hong Kong University. She also earned a Master’s in Management and Business Economics from Harvard University and a Bachelor’s in Economics and Political Economy from UC Berkeley.

People

Jarrid Green

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Jarrid is a director for BSR’s Inclusive Business Practice.

He supports leaders of global companies in their efforts to build inclusive organizations; navigate emerging industry and policy trends/flashpoints; and achieve strategic community and social impact. Jarrid also partners with philanthropic organizations including foundations and nonprofit intermediaries to identify opportunities to harness business influence for greater societal good.

Prior to joining BSR, Jarrid worked at Freedman Consulting, where he developed and managed strategic philanthropic initiatives, including donor coalitions and nonprofit initiatives focused on racial and civic justice issues, climate/sustainability impacts, and public health. Jarrid has also served in senior research and project management capacities at The Democracy Collaborative and The Center for Social Inclusion, where he led, supported, and published policy research and case studies focused on opportunities to dismantle structural racial inequities within community and economic development fields and practices.

Jarrid received his MBA in Sustainability from Bard College where he served as an inaugural member of the program’s Justice, Equity, Diversity, and Inclusion (JEDI) Advisory Board and provided advisory support and instruction to first- and second-year MBA students in his role as a part-time faculty member for the college’s experiential-learning, sustainability consulting course NYCLab. In 2024, he received a Certificate in AI Essentials for Business from Harvard Business School Online.

Jarrid holds a BA in English Language and Literature from the University of Maryland. He is also an alum of the Council of Urban Professional Fellowship Institute.

People

Scarlet George

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Scarlet is a Relationship Lead and sustainability advisor on BSR’s Business Transformation team, with a focus on the technology sector. She works with global companies across cloud computing, software, digital infrastructure, AI, and enterprise technology to address complex sustainability, procurement, governance, and stakeholder engagement challenges.

Through BSR’s advisory services, Scarlet helps companies identify and prioritize material sustainability issues, develop strategies and governance approaches, strengthen responsible procurement and supplier management, and translate evolving business and regulatory priorities into practical action.

Prior to joining BSR, Scarlet was a Senior Consultant at Oxford Insights, where she advised governments, international organizations, and technology companies on AI policy, public procurement, digital transformation, and public-sector innovation. She has presented at UNESCO conferences on AI and Sustainable Development and AI and Education, and has authored research on inclusive public procurement and ICT procurement.

Scarlet holds a Master’s degree in Middle East and Islamic Studies and International Affairs from the American University of Paris and a Bachelor’s degree in Politics and International Relations from the University of Kent.

People

Renata Greenberg

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Renata leads BSR’s Nordic practice, working with a diverse range of sectors and sustainability topics, with primary focus on Value Chain Transformation and Tech.

She helps companies transition towards more ambitious goals and practices in adapting to the continuously more and more demanding regulatory landscape and stakeholder expectations to create a Just and Sustainable World, via adopting more resilient practices, management systems, working collaboratively, and providing the necessary support and incentives to enable meaningful sustainable change.

Renata brings over 20 years of experience in innovation and sustainability in global value chains. Prior to joining BSR, Renata worked in A.P. Møller - Mærsk, Coloplast, Danske Bank, and The Conference Board. She has served on various boards, including Maersk, IKEA Industry, Organic Basics, and the Danish Initiative for Ethical Trade. She was a long-term member of the UN Global Compact Advisory Group on Supply Chain Sustainability and participated in the shaping of the UN Sustainable Development Goals.

Renata is a First Mover Fellow with the Aspen Institute’s Business and Society. She holds a professional degree in global trade; a BSc in Philosophy and Rhetoric from the University of Copenhagen; a Post Graduate Diploma in Strategic Organisational Leadership and Strategy from SAID Business School, University of Oxford. She speaks English, Danish, Russian, and intermediate French.

Blog | Wednesday November 2, 2022

How Demand for Critical Minerals Could Lead to Counterintuitive Futures

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Rohitesh Dhawan, President and CEO of the International Council on Mining and Metals, shares some of the weird scenarios he envisions for the future of critical metals and minerals with Jacob Park, Director of the Sustainable Futures Lab.

Demand is intensifying for critical minerals—not least with the energy transition. What are the main forces at play?

We know that the energy transition is going to be metals and minerals-intensive, but we forget that it’s layering a new source of demand on top of existing demand. Geopolitics is critical because China controls 25 percent or more of the mining and/or processing for four of the five top minerals for the transition—when the relationship between China and the West is the tensest it has been for decades. To put it simply, the West is far more dependent on China for metals than it is on Russia for energy.

Which makes the question of responsible energy generation even more complex.

Yes. I think critical minerals can be thought of as two key questions: how much and how. We’re focusing a lot on the “how much” and not enough on how to make sure that mining is benign at least and positive at best for communities and the environment. It’s self-defeating to drive an electric car on the basis that it’s zero emissions if it generates a ton of emissions in production. Meanwhile, there is the potential for significant human rights challenges in the production of critical minerals if not done well.

How do some of the big policy changes we’ve seen in recent months—such as the Inflation Reduction Act (IRA) and the California Climate Act—change or intensify these dynamics?

They increase demand, bring demand closer to home, and drive up standards. That’s not all. A high proportion of those minerals—80 percent by 2026—needs to be extracted or processed in the US or a free-trade country. This may change the technologies that we adopt. Take nickel: the major sources of supply include Indonesia, the Democratic Republic of Congo (DRC), and Russia. I expect there will be a stronger case to increase the market penetration for technologies, such as lithium and phosphate batteries, that don't rely on hard(er)-to-source commodities.

What are the prospects for circularity when it comes to sourcing trickier minerals?

Circularity is not new to mining. Two-thirds of the copper produced since 1900 is still in productive use because it doesn't lose its core properties the more you recycle it. While certain metals and minerals are infinitely recyclable, they're not waste in the same way as plastic. We could even consider the mining industry a provider of renewable materials.

So the circular economy is an essential source of supply for critical minerals. That said, the amount of material available to be recycled is not growing at the same rate as demand. It's only going to be post-2030 or 2035 when we see substantial quantities come through from old car batteries—which contain about 10,000 times as much of these metals as your average phone.

How do you see this playing out over the next decade?

I think three unusual things are likely to happen. One is price spikes. The EU aims to force a certain proportion of recycled material into the supply chain, but there won't be enough of it available—so we might see recycled materials costing more than raw material, regardless of production cost.

The second could be that the governments end up offering exceptions for responsibly produced virgin raw material, given that scrap isn't available. Isn't that the antithesis of encouraging the circular economy? Well, you need to build up a stock of durable material that can then be infinitely recycled.

The third counterintuitive phenomenon is that we may end up breaking perfectly usable and useful things to get the latent metal to reuse. There's anecdotal evidence that China is demolishing perfectly good buildings to extract copper wires for manufacturing. We should think about this deeply because you may be taking the copper to reuse, but can you reuse all the concrete, cement, and wood? 

How do you see the Just Transition playing out among all this weirding?

One scenario is that the countries that push hardest for circularity are blamed for creating an unjust transition. This is odd because surely the countries that have contributed most to climate change should take the greatest action to solve it—and that means promoting circularity. But in doing so, you demand fewer metals and minerals from the emerging economies that typically produce them.

In other words, you might be accused of kicking away the development ladder. How do you balance creating development opportunities for countries that can supply raw metal and materials with a domestic imperative to promote circularity? That’s an ethical question world leaders must grapple with.

What other questions do companies need to grapple with?

The first is mining waste: managing them safely, re-mining them where possible, and technologies to reduce waste generation in the first place. On re-mining, keep in mind that copper waste dumps in the DRC contain more residue copper than virgin mines in places like Chile. Then there’s radical transparency. The industry needs to provide information on its social and economic impact in a credible way: all ICMM companies have committed that from 2024 onwards, the information they disclose on their social and economic contribution will contain the gender breakdown, the proportion of wages paid to the living wage, and the ratio of that wage to the CEO's compensation. Similarly, ICMM members have committed to making contracts entered into or amended since 1 January 2021 with governments public, and to report their tax payments on a country-by-country basis.  

Finally, the crisis of nature and biodiversity loss is becoming front and center. There's an interesting relationship between large-scale responsible industrial mining and biodiversity conservation goals. Mines tend to be large landholders and many use somewhere between 3-9 percent of the total land area available to them. So large-scale industrial responsible mining is potentially a great source of nature-positive action.

Beyond waste dumps and forests, where do you see the next frontiers for mining?

There's an unresolved debate about deep sea mining and whether it can be done responsibly. Then there’s lunar mining: recently, the Chinese discovered a transparent sort of crystal on the moon that contains many of the important elements of our future energy sources. Our search for new metals and minerals is literally taking us into the depths of beyond.

Sustainability FAQs | Tuesday November 1, 2022

Net Zero Targets

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This FAQ sets out the BSR perspective on net zero targets. We believe that setting science-based net-zero targets—and more importantly, taking ambitious action to achieve these targets—is core to the role that companies should play in helping achieve the Paris Agreement’s stretch target of limiting global warming to 1.5°C above pre-industrial levels.

Defining Net Zero

What is the definition of net zero?

The Intergovernmental Panel on Climate Change (IPCC) defines net-zero emissions as the point when “anthropogenic emission of greenhouse gases to the atmosphere are balanced by anthropogenic removals over a specified period.” Put more simply, net zero is achieved when remaining human-caused greenhouse gas emissions are counterbalanced by removing greenhouse gas emissions from the atmosphere via carbon removal.

Why do we need company net zero targets?

The Paris Agreement established our collective vision for a net-zero economy in which we limit warming to 1.5°C above pre-industrial levels. However, current climate science predicts warming in the range of 2.5°C-4.0°C, bringing irreversible changes to oceans, ice sheets and global sea levels, and causing impacts such as extreme heat and weather, species loss, crop yield reductions, fishery decline, disrupted supply chains, public health crises, and displaced communities.

BSR’s vision is an inclusive net-zero economy no later than 2050, which the IPCC has concluded is needed to hold warming to 1.5°C. While some governments (such as the EU-27, China, Japan, South Korea, Canada, South Africa, the United States, and over 100 other countries) have established their own net-zero pledges, company net-zero targets are also needed to build net-zero economies.

What is the definition of a company net-zero target?

Companies need clear direction on what net-zero targets are and which actions drive real climate progress, and for this reason the launch of the Science Based Targets initiative (SBTi) Net-Zero Standard in late 2021 marked a significant milestone.

The SBTi Net-Zero Standard is the first science-based and independently certifiable standard that assesses a company's net-zero targets and clearly grounds them into 1.5°C-aligned short-term and long-term action. The 

SBTi Net-Zero Standard gives companies confidence that their near-term and long-term targets are scientifically sound, aligned with what is needed to contribute to a habitable planet, widely understood by stakeholders.

The SBTi Net-Zero Standard defines a net-zero target as:

• Reducing scope 1, 2, and 3 emissions to zero or to a residual level that is consistent with reaching net-zero emissions at the global or sector level in eligible 1.5°C-aligned pathways.

• Neutralizing any residual emissions at the net-zero target year and any GHG emissions released into the atmosphere thereafter.

The SBTi Net-Zero Standard sets out four key elements that make up a net-zero target: (1) a near-term science- based target; (2) a long-term science-based target; (3) mitigation beyond the value chain; (4) neutralization of any residual emissions.

What are near-term science-based targets and why are they important?

Near-term science-based targets are 5-10-year greenhouse gas mitigation targets that require companies to align their Scope 1 and 2 targets with a 1.5°C pathway goal while Scope 3 ambitions should retain a threshold of well below 2°C. When companies reach their near-term target date, they must calculate new near-term science-based targets to serve as milestones on the path towards reaching their long-term science-based target.

Near-term science-based targets are needed to galvanize the immediate and ambitious action needed for significant emissions reductions to be achieved by 2030. Near-term emissions reductions are critical to not exceeding the global emissions budget, which is the maximum amount of cumulative emissions consistent with limiting warming to a 1.5°C pathway.

What are long-term science-based targets and why are they important?

Long-term science-based targets show companies how much they must reduce value chain emissions to align with reaching net-zero in line with 1.5°C pathways by 2050 or sooner (2040 for companies in the power sector).

Long-term science-based targets are needed to drive economy-wide alignment and long-term business planning to reach the level of global emissions reductions needed for climate goals to be met based on science. A company cannot claim to have reached net-zero until the long-term science-based target is achieved.

Does a company need both near-term and long-term science-based targets?

If a company sets a long-term science-based target to reach the level of decarbonization required to reach net- zero at the global or sector level in 1.5°C pathways within a 10-year timeframe, the near-term science-based target is not required.

What is “mitigation beyond the value chain” and why is it important?

The concept of “mitigation beyond the value chain” refers to mitigation action or investments outside of a company’s value chain, such as activities that avoid or reduce greenhouse gas emissions or remove and store greenhouse gases from the atmosphere.

Mitigation beyond the value chain involves companies playing a critical role in accelerating the transition to net- zero economies and increasing the likelihood that the global community stays within a 1.5 ̊C carbon budget.

Mitigation beyond the value chain represents ambitious action, but is not substitute for the reduction of a company’s own value chain emissions.

What is “neutralization of any residual emissions” and why is it important?

The concept of “neutralization” refers to measures that companies take to remove carbon from the atmosphere and permanently store it to counterbalance the impact of their own emissions that remain unabated.

Although the SBTi Net-Zero Standard expects companies to reduce their emissions by at least 90%, some residual emissions may remain, and these emissions must be neutralized to reach net-zero emissions.

Should science-based targets vary by industry?

Yes. The SBTi Net-Zero Standard includes both a “cross-sector pathway” and multiple “sector-specific pathways” for setting science-based targets. Companies in the power generation, forestry, land-use, and agriculture sectors are required to set targets using “sector-specific pathways”, while companies in all other industries can choose between a “cross-sector pathway” or one of several “sector-specific pathways” that either have or are in the process of being developed.

What is the scale of emissions reduction is envisioned?

Using the “cross-sector pathway” companies are expected to set “near-term science-based targets” that reduce emissions at a linear annual rate of 4.2%; however, some “sector-specific pathways: vary significantly from the cross-sector pathway in the near-term. For “long-term science-based targets” most companies are expected to reduce emissions by 90% or more from 2020 levels.

How should scope 1 and 2 emissions be addressed in net-zero targets?

Near-term science-based targets must cover at least 95% of company-wide scope 1 and 2 emissions.

How should scope 3 emissions be addressed in net-zero targets?

Companies with scope 3 emissions that are at least 40% of total emissions must (1) cover at least 67% of their scope 3 emissions in near term science-based targets and align to well-below 2°C ambition, and (2) cover all material sources of scope 3 emissions in the value chain (with a materiality threshold of 90%) in long-term science-based targets and align with 1.5°C scenarios.

Do “avoided emissions” count towards net-zero targets?

A company’s product avoids emissions if it has lower life cycle emissions relative to a different product providing an equivalent function. Companies should pursue avoided emissions as part of their climate strategy, and products with lower life cycle emissions will help other companies achieve their net-zero targets—however, avoided emissions occur outside of the product’s life cycle, do not count as a reduction of a company’s scope 1, 2 and 3 emissions, and are not relevant for a net-zero target.

Does the purchase of “carbon credits” count towards net-zero targets?

The purchase of carbon credits from outside the value chain can be complementary to achieving net-zero targets, and companies can increase their impact by reducing emissions beyond their own value chain through credits and other forms of climate investment. However, carbon credits do not count as reductions toward meeting science-based net-zero targets and companies should only account for reductions that occur within their operations and value chain. Companies should make all viable efforts to reduce emissions consistent with a 1.5°C trajectory before looking to purchase credits.

High-quality carbon credits can enhance reductions and removals in the near term, including for hard-to-abate industries, and contribute crucial funding to activities that avoid, reduce, or remove emissions. These include reduction of short-lived climate pollutants and urgent action to stop tropical deforestation. The use of credits, whether avoided emissions credits, reduced emissions credits, or removal credits, must also meet the conditions of approved third-party standards and/or governments.

Company investment in carbon credits should also deliver additional social benefits or synergize with other environmental benefits, such as progress towards the Sustainable Development Goals. In addition, investment in underfunded climate solutions can bring down their price over time, target innovation in the value chain, decrease residual emissions over time.

Business Transformation

What is BSR’s ambition for companies?

BSR believes that net-zero goals are needed to incentivize decarbonization of the value chain and spur the business transformation needed to achieve the Paris Agreement’s stretch target of limiting global warming to 1.5°C above pre-industrial levels.

For this reason, we only support long-term science-based targets that are accompanied by near-term science- based targets that commit companies to both decarbonize their own footprint and transform their value chains to be consistent with a 1.5°C pathway.

What is business transformation and why does BSR emphasize it?

BSR defines business transformation as reshaping key business functions, models, products, and services to build inclusive net-zero value chains, and we emphasize action to mitigate scope 3 emissions.

Unlike decarbonizing a company’s own GHG footprint via scope 1 and 2 reductions, which can be largely accomplished by sustainability and operations functions, building a net-zero value chain has much broader implications to a company’s growth strategy and operating model. Companies will need to undertake business transformation towards net-zero value chains, harnessing functions outside sustainability and operations, and we encourage companies to think strategically about the business transformation needed to achieve net-zero targets.

What about the impact on people?

The adverse impacts of climate change will be exacerbated for communities that already face underlying socioeconomic inequalities or injustices, and net-zero targets are intended to mitigate these impacts. However, it is essential that climate justice—which we define as the recognition that climate change disproportionately impacts some communities over others and exacerbates underlying systemic inequalities —is central to any company climate action plan.

We emphasize the following three priorities in actions to achieve net-zero targets:

• A just energy transition: It is essential that the transition to a net-zero economy doesn’t leave behind workers and communities traditionally dependent on fossil fuel industries for jobs and livelihoods, including women who are underrepresented in today’s “green jobs” economy. Planning, dialogue, and engagement with workers and stakeholders is essential for a just transition, which aims to ensure social and economic opportunities of climate action are maximized and that fundamental labor principles and rights are upheld.

• Upholding Human Rights: The development and procurement of decarbonization technology and renewable energy requires the mining of metals and minerals—however, the extraction of many of these materials are associated with armed conflict, land and water grabs, violation of the rights of Indigenous peoples, the denial of workers’ rights to decent work and a living wage, and other human rights abuses. Companies need to establish business practices based on the UN Guiding Principles on Business and Human Rights to address the actual and potential adverse human rights impacts associated with this transition, implying more integrated approaches to climate change and human rights strategy.

• Ensuring Equitable Access to Clean Energy: When companies implement net-zero targets across their value chains suppliers will need access to renewables energy to meet their customers’ expectations. However, not all markets have access to clean technologies or renewables in the electrical grid, and under- resourced communities are more likely to experience energy insecurity and lack access to affordable, efficient, secure, and reliable clean energy. Identifying gaps in access to energy across the value chain is an important step to deciding what proactive actions companies can take—such as policy advocacy, financing, and coalition building—to counter inequities in access to clean energy.

How does BSR define climate leadership?

BSR believes that climate leadership means going beyond the minimum requirements of an SBTi Net-Zero Standard. We emphasize:

• Selecting a net-zero target year earlier than 2050 if a company’s footprint is largely in developed countries

• Setting and delivering an interim emission reduction target consistent with a 1.5°C trajectory

• Compensating for emissions outside the value chain enroute to your target year

• Implementing business transformation across functions

• Supporting communities which have suffered from climate injustice when implementing net-zero commitments

• Using a company’s influence to advocate for policy which advances climate justice and supports a just transition for all.

What are the main criticisms of net-zero targets, and what is BSR’s perspective on these criticisms?

Net-zero commitments are also increasingly subject to five criticisms which implementation must address to be truly credible and transformative.

Critique: Net-zero commitments divert attention from immediate abatement, effectively licensing short-term emissions.

Response: Companies with net-zero targets must also set and deliver an interim emissions reductions target following a 1.5°C trajectory, for example under the Science-Based Targets initiative, or as part of the Race to Zero campaign.

Critique: Net-zero commitments, which are typically based on a company’s fair share of global net-zero carbon dioxide by 2050, should not be inequitable between developed and developing countries.

Response: Companies whose emissions footprint sits largely in developed countries who have high historical emissions, should aim to achieve net zero ahead of 2050.

Critique: By focusing attention on removals which net out emissions in the target year, net-zero targets divert attention from immediate climate investments outside the value chain needed to keep 1.5°C within reach.

Response: Companies can dramatically increase their impact on the climate crisis by not merely abating emissions in the value chain on route to net-zero, but also compensating for emissions outside the value chain, for example by investing in climate solutions and methane reductions.

Critique: Net-zero commitments may greenwash business-as-usual action.

Response: Building a net-zero value chain requires genuine business transformation across functions, from supply chain engagement and procurement, to finance, and research and development and product design. Net-zero implementation then must demonstrate business transformation across these functions, including integration into the company’s business strategy with a clear climate action plan which has been vetted and approved by shareholders.

Critique: Net-zero commitments perpetuate climate and environmental injustice, for example in BIPOC and low wealth communities.

Response: Companies can support these communities through its net zero implementation. For example, renewable electricity can be purchased from companies with a proven track record of increasing energy access, carbon credits can be selected which benefit these communities, and low-carbon products and services can be procured in a manner which improves the equitable distribution of benefits of the net zero economy. This is where net-zero implementation strategies intersect with equity in the sustainability agenda.

Sustainability FAQs | Tuesday November 1, 2022

Materiality and Salience

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This FAQ sets out the BSR perspective on the related concepts of materiality and salience. We believe that implementation of the key concepts described in this FAQ—such as double materiality, impact materiality, and salience—provide the foundation for more resilient business strategies, informed decision making by all stakeholders, and the realization of human rights in practice.

Materiality

What is materiality?

Materiality is a foundational concept underpinning corporate disclosure.

The concept of “materiality” has its origins in the field of financial reporting, where it has referred to the disclosure of financial and non-financial information that is useful to the decision making of investors, lenders, and other creditors. These disclosures have generally been a legal requirement.

The term “materiality” was subsequently adopted by the field of sustainability^[1] reporting, where it has referred to the disclosure of information that is useful to the decision making of a wider range of stakeholders, such as civil society organizations, policy makers, and communities. These disclosures have generally been a voluntary undertaking.

BSR typically uses the following two definitions of materiality in the context of sustainability disclosures, with the IFRS representing the investor-oriented test and GRI representing the wider stakeholder-oriented test:

• IFRS Sustainability Disclosure Standard General Requirements (IFRS S1): “Information is material if omitting, misstating, or obscuring that information could reasonably be expected to influence decisions that the primary users of general-purpose financial reporting make on the basis of those reports, which include financial statements and sustainability-related financial disclosures and which provide information about a specific reporting entity.”
• Global Reporting Initiative (GRI): “Topics that represent an organization’s most significant impacts on the economy, environment, and people, including impacts on their human rights.”

It is important to note that the IFRS definition is conceptually consistent with the SEC definition of materiality, which defines material issues as matters that “either individually or in the aggregate, are important to the fair representation of an entity’s financial condition and operational performance…[information that is] necessary for a reasonable investor to make informed investment decisions.”

BSR also utilizes definitions contained in the draft European Sustainability Reporting Standards (ESRS) being developed to accompany the new EU Corporate Sustainability Reporting Directive (CSRD). These are conceptually consistent with the IFRS and GRI definitions:

• Financial materiality: “A sustainability matter is material from a financial perspective if it triggers or could reasonably be expected to trigger material financial effects on the undertaking. This is the case when a sustainability matter generates or may generate risks or opportunities that have a material influence, or could reasonably be expected to have a material influence, on the undertaking’s development, financial position, financial performance, cash flows, access to finance or cost of capital over the short-, medium- or long-term.
• Impact materiality: “A sustainability matter is material from an impact perspective when it pertains to the undertaking’s material actual or potential impacts on people or the environment over the short-, medium- or long-term…”

What is “double materiality”?

Over the past two decades the concept of “materiality” has suffered from being one term with two different definitions—the legal requirement to disclose information relevant for investors, and the voluntary expectation to disclose information relevant for a wider range of stakeholders.

The ESRS have introduced the concept of “double materiality”. This provides clarity that companies should report on matters that influence enterprise value (financial materiality) and matters that affect the economy, environment, and people (impact materiality).

Today BSR typically takes a “double materiality” approach by incorporating both dimensions into a single materiality assessment, with one axis in a 2x2 being dedicated to each dimension.

This is consistent with the notion that double materiality is the union of the two concepts in their totality, and not simply examining where they overlap—i.e., double materiality is using both concepts in combination, rather than only considering their intersection. A sustainability matter is “material” when it meets the criteria defined for impact materiality or financial materiality, or both.

We believe that “double materiality” supports conceptual clarity (i.e., that some information is required by investors to assess the creation of enterprise value, and some information is required by other stakeholders to assess broader impacts on society) and works with the grain of standards development (i.e., it encompasses both the IFRS Sustainability Disclosure Standards and GRI Sustainability Reporting Standards).

What is “impact materiality”?

The term “impact materiality” captures the notion that companies should understand the materiality of matters that affect the economy, environment, and people based on a company’s actual and potential impacts, rather than perceptions of what is important. The term “impact materiality” becoming increasingly common implies changes in how stakeholders are defined and how matters of importance are identified and prioritized.

In the past, materiality assessments often defined stakeholders as those whose judgments, decisions, and actions may be influenced by the company’s sustainability disclosures; material matters were those that were “of interest” and “decision-useful” for report readers.

By contrast, “impact materiality” defines stakeholders as those that have an interest that is (or could be) affected by the company’s activities and decisions, even if they are not users of a company’s sustainability reporting. “Impact materiality” determines material issues based not on whether they are “of interest to stakeholders”, but whether they “have an impact on the economy, environment, and people.”

What are the practical implications of “impact materiality”?

There are two main implications: (1) which stakeholders are engaged with, and (2) the criteria used to prioritize sustainability matters.

First, it is important for the company to engage with all affected stakeholders to understand how they may be impacted by company activities, and not limit stakeholder engagement to just those who regularly interact with the company—for example, this may mean paying closer attention to rightsholders that do not buy or use a company’s products, or to communities who may be impacted by infrastructure development.

Second, it means prioritizing impacts on the economy, environment, and people using the following criteria:

• Scale: How grave is the negative impact, or how beneficial the positive impact?
• Scope: How widespread would the positive or negative impacts be?
• Remediability^[2]: Is it possible to counteract or make good the resulting harm (i.e., restoring the environment or affected people to their prior state)?
• Likelihood: What is the chance of the impact happening?

In practice, “impact materiality” means not asking stakeholders to “rank” how important they believe issues to be, and instead acknowledging that material impacts may not always be the most referenced concerns in stakeholder dialogue. Determining priorities is not a popularity contest.

What is “dynamic materiality”?

The concept of “dynamic materiality” captures the notion that the relative materiality of a sustainability matter may change over time.

One example is a sustainability issue initially being deemed as not having a material relevance for users of general-purpose financial reporting, but as having a material impact on the economy, environment, and people. Over time, this sustainability issue may become more material to users of general-purpose financial reporting, for example because of government regulation, evolutions in consumer sentiment, or changes in the operating context. The reverse can also happen if a sustainability matter is well managed by a company.

In this sense, the “impact materiality” component of “double materiality” can provide an early warning signal for what might become financially material later. It may also focus the attention of policy makers seeking to understand which sustainability matters are not material to enterprise value creation but are to society more broadly, and that therefore may benefit from greater regulatory attention.

BSR addresses “dynamic materiality” in part through our use of futures methodologies and scenario planning to identify how the materiality of issues may shift over time.

Do internal stakeholders have insights to offer on impact materiality?

Yes. In the past, materiality assessments often involved asking internal stakeholders which sustainability topics are most important for enterprise value creation and asking external stakeholders about which issues might influence their judgements and decisions.

However, internal stakeholders may have significant insights to offer on impacts on the economy, environment, and people—a product manager in a technology company may have insights into new product features that an external stakeholder would not, for example. The reverse can also be true, such as external stakeholders providing early insights into regulatory change or shifting consumer expectations.

Is anything changing in methods to assess “financial materiality”?

BSR anticipates greater discipline in assessing the impact of sustainability on enterprise value creation and enhanced alignment with enterprise risks management processes. For example, BSR’s methodology seeks to identify sustainability topics that may significantly affect enterprise value by influencing future cash flows or creating risks and opportunities for the company using an approach based on enterprise risk management, such as in our choice of assessment criteria. This might include:

• Strategy and financials: How significant is the impact on the company's ability to meet strategic and financial objectives?
• Reputation: How significant is the impact on the company's reputation?
• Regulation: How significant is the impact of the topic on the company's ability to comply with regulations?
• Likelihood: How likely is the impact to occur?

Further, it is important to note that, by focusing on enterprise value creation over the short, medium, and long term, the concept of financial materiality for sustainability reporting is different from the concept of materiality used in the process of determining which information should be included in a company’s financial statements.

Does BSR support use of the Recommendations of the Task Force on Climate-related Financial Disclosures (TCFD)?

Yes. BSR welcomes the fact that the ISSB and ESRS standards will build on existing frameworks and guidance, including the TCFD Recommendations and Climate Disclosure Standards Board (CDSB) Framework.

Salience

What is salience?

Salience is a foundational concept underpinning how a company should prioritize action to avoid, prevent, and mitigate adverse human rights impacts.

While the concept of “materiality” has its origins in the field of reporting, the term “salience” has its origins in the field of human rights due diligence and the UN Guiding Principles on Business and Human Rights (UNGPs).

Salience refers to identifying, prioritizing, and addressing the company’s most important adverse human rights impacts, with salience defined by the scale (how grave), scope (how widespread), irremediable character (how hard to make good) and likelihood of an adverse human rights impact.

What are the differences between impact materiality and salience?

Historically there have been two important differences to note between materiality and salience: (1) materiality is about disclosure, while salience is about management; (2) materiality covers all issues, whereas salience has been limited to human rights impacts.

Are the concepts of materiality and salience converging?

Yes, two significant developments are bringing the concepts of salience and materiality closer together.

First, the 2021 iteration of the GRI Sustainability Reporting Standards adopted a revised definition of materiality (see above) that incorporates the scope, scale, irremediable character, and likelihood definitions that underpin the concept of salience and the UNGPs.

Second, the ESRS also propose to adopt a definition of impact materiality based on the concept of salience and the UNGPs (i.e., scope, scale, remediability, likelihood). Further, the ESRS make clear that “the materiality assessment of a negative impact is informed by the due diligence process defined in the international instruments of the UN Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises.”

In short, the concept of salience is being utilized for disclosure (not just management) and for a comprehensive range of economic, environmental, and social issues (not just human rights). BSR welcomes these developments as enhancing conceptual clarity and generating synergy across previously siloed assessments.

Can a salience assessment be combined with a materiality assessment?

It depends. The harmonization of prioritization criteria between “salience” and “impact materiality” means that a salience assessment can be undertaken as part of a materiality assessment provided the expectations of a salience assessment are met—for example, that impacts on all potentially relevant human rights are considered and that affected stakeholders are engaged. BSR anticipates that this combined approach may become more common over time, especially for companies where salient human rights issues make up a large portion of material matters (e.g., social media companies).

However, we also expect that many companies will choose to keep these two assessments separate, while achieving efficiency, synergy, and harmonization by integrating the results of a salience assessment into a materiality assessment, rather than undertaking duplicative assessments.

Technical Matters

How often should materiality assessments be undertaken?

As a matter of principle, materiality assessments should be reviewed annually as part of the company’s annual reporting cycle when deciding what information to disclose. However, a “full” materiality assessment with extensive stakeholder engagement may not be needed every year and should instead be prioritized to happen alongside major changes, such as mergers and acquisitions, market entry, or significant changes in operating context.

What is the threshold for determining materiality or salience?

Companies should define a cut-off point or threshold above which matters are considered material and / or salient. EFRAG’s guidance on double materiality articulates five levels of impact and states that a topic is material if the assessment shows its impacts as being “critical”, “significant” or “important” and not material if the impacts are deemed “informative” or “minimal”. If a materiality threshold is met for either dimension of materiality (financial materiality or impact materiality), then the company should report on the topic. However, the “where and how” aspects for setting the threshold remains iup to the company’s discretion, noting that (1) setting a threshold likely involves professional judgement rather than quantitative precision, and (2) materiality and salience are not absolute concepts, but relative to the other impacts the company has identified.

Should material or salient issues be further prioritized above a threshold?

In financial reporting a threshold-only approach is typically taken, meaning that all issues crossing a threshold of materiality are disclosed (e.g., risk factors in a Form 10-K), but with little attempt to further prioritize among material issues. By contrast, in sustainability reports many companies have chosen to publish 2x2 matrixes or other similar visuals to convey the relative prioritization of material matters.

BSR believes that either approach is legitimate, but we urge caution when conveying relative prioritization for two reasons: (1) a 2x2 matrix (or similar) can suggest significantly more quantitative precision in relative prioritization than is realistic; (2) a 2x2 matric (or similar) can suggest a collection of independent and mutually exclusive topics, whereas many material matters are interrelated, interdependent, and indivisible.

Should materiality and salience assessments cover a company’s entire value chain, including both upstream and downstream?

Yes. The importance of taking a “whole value chain” approach is emphasized by both the ESRS and the UNGPs.

The ESRS state that “[material] impacts include those connected with the undertaking’s own operations and value chain, including through its products and services, as well as through its business relationships. Business relationships include those in the undertaking’s upstream and downstream value chain and are not limited to direct contractual relationships.”

The UNGPs state that “the responsibility to respect human rights requires that business enterprises: (a) Avoid causing or contributing to adverse human rights impacts through their own activities, and address such impacts when they occur; (b) Seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products or services by their business relationships, even if they have not contributed to those impacts.”

Is a materiality assessment required for sustainability strategy?

No. Many companies find it useful to undertake a materiality assessment as a step in the creation of strategy to help ensure that strategy focusses resources on the most important matters and set direction; however, materiality assessment is not a requirement for sustainability strategy, which can be undertaken separately from materiality.

Is a salience assessment required for human rights strategy?

Yes. The UNGPs are clear that companies have a responsibility to identify and assess any actual or potential adverse human rights impacts with which they may be involved and use this as the starting point for determining appropriate action to prevent and mitigate adverse human rights impacts.

Who should approve the final list of material topics or salient issues?

While third party organizations (such as BSR) may be actively involved in the materiality or salience assessment, as a matter of law and principle the final determination of material topics or salient issues should be made by the company. This determination should be made by the highest governance body in the company.

Sustainability FAQs | Tuesday November 1, 2022

Climate Change and People

Preview

This FAQ sets out the BSR perspective on the relationship between climate change and people. Both the physical effects of climate change (e.g., extreme weather events) and the transition to a net-zero economy (e.g., shift from fossil fuels to renewable energy) will have disproportionately adverse impacts on under-resourced and under- served communities and exacerbate the underlying systemic inequities that these communities already face. We believe that climate justice should be central to company action on climate change and address the interlocking elements of access and participation, human rights, just transition, and resilience.

Climate Justice

What is climate justice?

Climate justice is the recognition that climate change (which is primarily caused by humans burning fossil fuels) disproportionately impacts some communities over others and exacerbates underlying systemic inequalities.

Climate justice prioritizes the people and communities that are most likely to be affected by the climate crisis but are least responsible for it, and places the needs, voices, and leadership of those who are the most impacted at the forefront.

What is the connection between justice and climate change?

There are at least three key elements to the connection between justice and climate change, and these set the context for business approaches to climate justice.

• Those least responsible are affected the most: The climate crisis has been caused by those with the economic power and privilege to overconsume resources; however, those least responsible for climate change are also least able to adapt and recover from its impacts.
• Existing inequities exacerbate the impact or risk: Some people are negatively affected due to existing inequities related to income, access to resources, and livelihoods that often correlate with gender, race, disabilities, and other factors. They may also live in regions or countries most affected by the climate crisis (e.g., physical events such as hurricanes and droughts).
• Climate policies have unequal consequences and participation: Policies designed to manage climate change have unequal consequences, and the climate change decision making processes (e.g., emissions reductions, adaptation strategies) often exclude those most affected by the climate crisis.

What is the connection between business and climate justice, just transition, human rights, and resilience?

There are at least four ways in which climate change can disproportionately impact communities facing systemic inequities and where solutions can be focused:

• Just transition to a net zero economy: The transition to a net-zero economy requires a shift away from fossil fuels—but while necessary, this transition risks leaving behind workers and communities dependent on fossil fuel industries for jobs and livelihoods. For example, women risk being left out of the “green jobs” movement because current operational and technical jobs that are predominantly held by men will be redeployed to similar technical roles in renewable energy development.

• Human rights in the renewables value chain: The development and procurement of renewable energy can be associated with human rights violations, including land grabs and poor working conditions. For example, renewable energy supply chains require mining of metals and other precious metals for solar cells and batteries, and these industries are associated with conflict and poor working conditions.

• Resilience to climate change impacts: Extreme weather events, drought, flooding, sea-level rise, heatwaves, and other physical events disproportionately exacerbate systemic inequity, including lack of access to finance, healthcare, and other essentials. For example, low-income Black communities were hit hardest during Hurricane Katrina because they did not have the resources to cope.

• Access to products and services: Under-resourced communities are more likely to experience energy insecurity and lack access to affordable, efficient, secure, and reliable clean energy. For example, older, cheaper, and more polluting vehicles will be exported to lower income countries while advanced countries shift to an electric vehicle market.

What is “loss and damage”?

“Loss and damage” refers to the consequences of climate change that go beyond what people can adapt to, or when options exist but a community doesn’t have the resources to use them. Loss and damage can result from both extreme weather events and sea level rise, and can be divided into economic losses (e.g., disrupted supply chains) and non-economic losses (e.g., impacts on culture). Loss and damage harms vulnerable communities the most, making it an issue of climate justice. The Paris Agreement recognized the importance of “averting” (mitigation), “minimizing” (adaptation), and “addressing” (loss and damage), with the latter referring to helping people after they have experienced climate-related impacts—such as via funding, financing, and humanitarian assistance after an extreme weather event.

What should companies do to address climate justice?

Companies should ensure justice is central to their climate change strategies. There are few examples of this in practice today, so BSR encourages companies to innovate through one or more of the following three approaches:

• Define a commitment: Companies should ensure that justice is integrated into climate strategy, policies, practices, and investments, appropriate for their industry, business model, and location.

• Localize action across the value chain: Companies should co-create solutions and opportunities by first listening to communities most affected.

• Undertake inclusive advocacy: Companies should promote policy frameworks that address systemic injustices and institutional barriers and amplify the voices of frontline communities in climate policy, such as in relation to “loss and damage”.

Just Transition

What is the just transition?

The International Labor Organization (ILO) defines the just transition as follows: “A Just Transition means greening the economy in a way that is as fair and inclusive as possible to everyone concerned, creating decent work opportunities, and leaving no one behind. A Just Transition involves maximizing the social and economic opportunities of climate action, while minimizing and carefully managing any challenges – including through effective social dialogue among all groups impacted, and respect for fundamental labour principles and rights.”

BSR views the just transition as both an outcome (an inclusive and green future that maximizes the social and economic opportunities for workers and communities) and a process (a partnership with those impacted by the transition to net zero, involving people as active participants in the transition).

What does the Paris Agreement say about the just transition?

Signatories to the Paris Agreement commit to take into account “the imperatives of a just transition of the workforce and the creation of decent work and quality jobs in accordance with nationally defined development priorities.”

What are the ILO Just Transition Guidelines?

Endorsed by the ILO’s Governance Body in 2015, the ILO “Guidelines for a just transition towards environmentally sustainable economies and societies for all” provide non-binding guidance to governments and social partners on the just transition. The Guidelines set out a vision for governments, workers, and employers to use the process of structural change to support a low carbon economy, create decent jobs at scale, and promote social protection.

Are the Sustainable Development Goals (SDGs) relevant to the just transition?

Yes. The relevant SDGs are SDG 8 (“promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all”) and SDG 13 (“take urgent action to combat climate change and its impacts”).

What are examples of actions companies can take?

As companies transition out of high-emitting industries and/or energy sources, they need to understand and manage their potential adverse impacts throughout operations, projects, and value chains, including both upstream and downstream. Companies can make the just transition integral to their net-zero plans in the following ways:

• Identify people (e.g., workforce, communities) who may be impacted by transition plans

• Engage in social dialogue with workers and their representatives

• Promote an inclusive workforce transition (e.g., employee training, talent development, or reskilling programs)

• Engage suppliers of renewable energy to advance just transition principles in company supply chains

The just transition is a systemic challenge beyond the reach of any one company. What else should companies do?

Companies can seek to influence the development just transition policies and strategies of governments in a responsible manner, such as encouraging the adoption of the ILO Just Transition Guidelines, promoting just transition plans in countries, integrating just transition considerations and activities in their own operations and their supply chain, and supporting / funding civil society organizations working to achieve a just transition.

What human rights are at stake in the just transition?

Rightsholders must be central to the just transition as there is potential to impact or cause additional impact to numerous human rights. The most salient human rights include: the right to an adequate standard of living; right to fair renumeration; right to equal pay; right to just and favorable conditions of work; right to rest and leisure; right to peaceful assembly and association; right to form and join trade unions; right to equality and non-discrimination.

Human Rights

Why are human rights relevant to climate change?

The physical impacts of climate change, the transition to a net-zero economy, and the ability of communities to respond to climate change can impact any human rights contained in the International Bill of Human Rights. The impacts of rising global temperatures—natural disasters, the proliferation of vector-borne diseases, climate migration, famine, and drought—will negatively impact many human rights, such as rights to land, shelter, natural resources, mobility, health, employment, and livelihoods.

The transition to a net-zero economy will impact the rights such as an adequate standard of living, equal pay, just and favorable conditions of work, rest and leisure, and the right to form and join trade unions. For example, the development and procurement of decarbonization technology and renewable energy requires the mining of metals and minerals—however, the extraction, production, and disposal of many of these materials are associated with armed conflict, land and water grabs, violation of the rights of Indigenous peoples, the denial of workers’ rights to decent work and a living wage, and other human rights abuses.

Civil and political rights such as privacy, freedom of expression, assembly, and association, and political participation are all essential for the ability of rightsholders and communities to participate in decision-making about how the impacts of climate change are addressed. The absence of adequate protection for human rights— particularly the right to information, participation in decision-making, and access to remedy—magnifies the risk faced by communities who are disproportionately impacted by both climate change itself and our response to it.

The right to share in scientific advancement and its benefits is relevant for access to technologies designed to mitigate or assist with adaptation to climate change.

Finally, the urgent need to address the climate crisis also places new pressure on intellectual property rights and raises new human rights dilemmas, such as how to balance the right to freedom of expression with the desire for a healthy information environment that supports informed decision making (i.e., address climate misinformation).

Is there a right to a healthy environment?

Yes. The right to a healthy environment was acknowledged by the United Nations Human Rights Council in October 2021 and endorsed by the UN General Assembly in July 2022. This right is interconnected with other health-focused human rights, such as the right to water and sanitation, right to food, and right to health.

What responsibility do companies have to address the human rights impacts of climate change?

The UN Guiding Principles on Business and Human Rights (UNGPs) serve as the primary internationally accepted framework for standards and practice regarding human rights and business. According to the UNGPs, companies have a responsibility to respect human rights, which requires that companies (a) avoid causing or contributing to adverse human rights impacts through their own activities and address such impacts when they occur and (b) seek to prevent or mitigate adverse human rights impacts that are directly linked to their operations, products, or services by their business relationships, even if they have not contributed to those impacts.

In the context of climate change, this means that companies have:

• A responsibility to address adverse human rights impacts related to their physical climate impacts

• A responsibility to address adverse human rights impacts related to their transition to a low-carbon economy

• An opportunity to promote the realization, fulfillment, and enjoyment of rights in a resilient world.

What is a human rights-based approach to climate change?

Put simply, companies have a responsibility to identify and address the adverse human rights impacts arising from the physical climate impacts of their business operations and the impacts associated with their transition plans. To appropriately fulfill this responsibility, companies should integrate a human rights-based approach into their climate work by consulting with impacted rightsholders, identifying potential adverse human rights impacts arising from their climate strategies, and taking action to address these impacts.

Can companies combine their use of the UNGPs and the TCFD guidelines?

Yes, there is an opportunity to embed an assessment of potential human rights impacts into the climate scenario analysis that companies undertake when implementing the Taskforce on Climate-related Financial Disclosures (TCFD) recommendations or complying with regulatory requirements based on the TCFD.

The TCFD is based on the premise that the most significant effects of climate change will emerge over the medium to longer term, and that their timing, magnitude, and impacts are uncertain. For this reason, the TCFD offers a scenario analysis framework for assessing the potential implications of a range of plausible future states under conditions of uncertainty, allowing companies to understand how various combinations of climate-related risks may evolve over time. We believe there are opportunities to identify the potential human rights impacts of different climate scenarios during this analysis, thereby improving the quality of a company’s human rights due diligence.

We believe there are opportunities to embed climate justice considerations into this analysis to explore how different scenarios may disproportionately impact some communities over others and exacerbate underlying systemic inequalities. This analysis will inform efforts to make climate justice central to company action on climate change.

Access

Why is it important to consider access to energy?

Under-resourced communities are more likely to experience energy insecurity and lack access to affordable, efficient, secure, and reliable clean energy. We need to ensure all communities have equitable access to the resources needed to move to net zero and respond to a changing climate.

For example, small and medium sized enterprises may not have access to the Power Purchase Agreements (PPAs) necessary to reach their customers’ net-zero targets, while fuel-combustion vehicles (i.e., older, cheaper, and “dirtier” technologies) may be shipped to lower-income countries while higher-income countries shift to an EV market.

How should companies consider access to energy?

When companies implement net-zero targets across their value chains suppliers will need access to renewable energy to meet their customers’ expectations. However, not all markets have access to clean technologies or renewables in the electrical grid, and under-resourced communities are more likely to experience energy insecurity. Identifying gaps in access to energy across the value chain is an important step to deciding what proactive actions companies can take—such as policy advocacy, financing, and coalition building—to counter inequities in access to clean energy.

Resilience

What is climate resilience?

Climate resilience is the ability to anticipate, prepare for, and respond to the impacts of climate change. Sometimes the terms “adaptation” and “resilience” are used interchangeably, but resilience has become the preferred term. Resilience emphasizes the ability to acquire new capabilities and thrive, whereas adaptation emphasizes using existing resources to navigate changing circumstances.

Why is climate resilience important for people?

It is essential to build resilience to the impacts of climate change—such as extreme heatwaves, floods, droughts, and wildfires—that we cannot prevent and that are endangering health, jobs, and livelihoods. We need to build systemwide resilience to the consequences of climate change that are now unavoidable, while simultaneously strengthening strategies to reduce emissions as quickly as possible in a bid to prevent these impacts from getting any worse.

Individuals and communities are less able to prepare, respond, and recover from extreme weather events and the spread of disease if they lack access to financing, insurance, or healthcare, or if their rights are not protected. Consequently, women, people of color, Indigenous peoples, people with disabilities, children, and the elderly in under-resourced communities are often less able to adapt and build resilience to climate impacts.

What does the Paris Agreement say about resilience?

The Paris Agreement establishes a global goal on adaptation—of enhancing adaptive capacity, strengthening resilience, and reducing vulnerability to climate change. The Paris Agreement recognizes that resilience is a global challenge faced by all and emphasizes the importance of technology development and transfer for improving resilience to climate change.

What is the role of business in building climate resilience?

Building resilience to climate change needs to be a driving force behind business strategies, investments, and policies. In doing so, we can ensure that people thrive despite climate change, such as through diverse food systems, regenerative agriculture, and new forms of economic opportunity.

Business can support climate resilience for everyone by helping to ensure that all communities across their value chains are prepared, protected, and able to rebound from climate impacts. Conducting climate risk assessments can be used to identify and understand how climate change is affecting communities across a company’s value chain, and climate resilience can be deliberately integrated into climate scenario analysis frameworks.

Companies can use climate resilience as an opportunity to identify ways to increase access to their products and services (e.g., medicines, technologies, energy, food) and help build resilience equitably. Large companies should be mindful of the need to engage smaller companies (e.g., suppliers, partners, customers) that do not have the capacity to address climate risks and bring them along in the journey—such as by providing access to renewable energy procurement, investing in technology and technology transfer, and other forms of capacity building.

Companies can emphasize the importance of equity and resilience in their public policy activities, such as prioritizing investments for low-income communities.